A company called Plastiq enables consumers to make payments with their credit cards that might not otherwise be accepted by the recipient.
One such example that comes to mind is the paying of a mortgage with a credit card. I noted in a previous post that was it was possible with a little bit of engineering, but there’s a more straightforward way if you’re willing to pay a fee.
How Plastiq Works
Plastiq refers to itself as a “first-of-its-kind online payment service” because it enables such transactions by processing your credit card payment then sending on payment to the payee in a form they actually accept.
As far as I know, no mortgage servicing companies accept credit cards as a form of payment.
To get around this, Plastiq allows you to pay them first with the credit card of your choice, at which point they pay the loan servicer or mortgage lender via check or electronic bank transfer.
These latter two forms of payment are generally acceptable, so Plastiq is able to make the mortgage payments on your behalf once you’ve paid them.
The company accepts MasterCard, Visa, and American Express, but Discover seems to be left out.
If for some reason your payment doesn’t arrive in time, but was submitted before the recipient’s deadline, Plastiq will cover any late fees incurred.
They say payments are generally treated as standard purchases, not cash advances, but it’s always good to test this first (with a small amount) or ask your card issuer to lower your cash advance limit to zero or as close to it as possible.
In exchange for this service, they charge a 2.5% fee. So for every $1,000 in payment made via Plastiq, you must pay $25.
Why Would You Pay a Fee to Pay Your Mortgage?
So you might be wondering why anyone would be willing to pay a fee to pay their mortgage with a credit card.
Well, for one, it’s a convenience thing, and someone might not have the money for whatever reason, or may need/want that money for something else at any given time.
Yes, you should be able to afford your mortgage payment with cash from your bank account, but we all know things can go awry.
Perhaps a different and more common angle has to do with the credit card points game.
Many credit card issuers offer a boatload of points if you spend X amount within a certain timeframe.
Typically, this is something like $5,000 in the first three months. However, not everyone has $5,000 in bills that can be paid with a credit card.
That is, unless they can pay the mortgage (or rent) with a credit card. Enter Plastiq, which enables homeowners to do just that.
This is one way to meet minimum spending requirements to earn those lucrative credit card bonuses without spending money unnecessarily.
And you can often offset most or all of the Plastiq fee depending on which credit card you use.
For example, the Citi Double Cash card earns 2% back on every purchase…well, 1% upfront and another 1% when you pay off the balance (which everyone should within the grace period).
That knocks the Plastiq fee down to just 0.5%, which on a $2,000 mortgage payment is only $10.
But it gets better. Plastiq often runs promotions, and one at the moment drops the fee to 1.75% for MasterCard payments and 2.25% for American Express payments if you schedule six or more rent or mortgage payments in advance.
So for the homeowner who uses a 2% cash back credit card, they actually come out ahead slightly. And they likely hit the spending amount required for their credit card bonus.
Ideally, more companies join the fray and push down the fee even more, making it more lucrative for everyone involved, but we’ll see if that actually materializes.
In the meantime, be responsible if and when you use a credit card to pay your mortgage. This option shouldn’t be abused.
Update: Plastiq now accepts Discover cards and charges a 2.5% fee. So you can pay your mortgage with a Discover credit card and come out slightly ahead if you take advantage of the double miles the first year on their 1.5% cash back card.
Update II: Plastiq no longer allows customers to use Visa or American Express cards to pay the mortgage. It’s unclear if this is temporary or long-term, but take note.